European Finance Leaders Welcome New Basel III Rules

Regulators and some bankers' groups applaud the lengthened timeline for the requirements and generally seem to agree bigger capital cushions make sense.

Reactions by world financial leaders to the bank rules published by the Basel Committee on Banking Supervision Sunday have been mostly positive, according to a number of press reports. The new Basel III recommendations require banks to increase the amount of high-quality, Tier 1 capital they keep in reserve to protect themselves against losses.

Germany's finance minister Wolfgang Schaeuble was quoted by Reuters this morning saying, "The Basel III bank capital rules reduce the risk of a repeat of the financial crisis and will not hurt the economic recovery." However, a German bankers association, the Association of German Public Sector Banks, said today that it is worried that the new Basel III capital standards will restrict lending and tighten German credit conditions. "Small and medium-sized businesses will suffer the most, because they lack access to capital markets," the group said in a statement. The group also criticized the time banks have been given to adapt to the new capital rules as too short.

European Central Bank Governing Council member Nout Wellink, who chairs the Basel Committee, said the Basel III accord meant banks would have to raise capital over a number of years but that even weaker state-controlled banks could sort out their problems.

Bank of Italy Governor Mario Draghi said at a press conference today that Italian banks are well-positioned to meet the new capital requirements.

Denmark's Financial Services Authority, which had voiced concerns about the impact of Basel III bank regulations before the full terms were announced, said today it was pleased that liquidity coverage ratio changes announced Sunday will not be fully implemented until 2015, as it had previously expected them to be introduced by 2013. (The liquidity coverage ratio for banks restricts the types of financial instruments banks can include as capital against possible future losses.)

French Finance Minister Christine Lagarde similarly approved of the graduated timeline. "We wanted an improvement in the quality and quantity of capital over a period of time that would allow growth and the financing of growth," she said at a press conference today. "This is excellent progress."

A Spain bankers association, AEB, said its member banks would be fine under the new rules. "In principle, Spanish banks fulfill the capital requirements of the [Basel III] agreement, or are perfectly able to do so in the required time frame," the group said.

Swiss regulators indicated today that they might go beyond new global banking rules unveiled at the weekend and instead impose stricter requirements on the country's top banks, UBS and Credit Suisse, according to Reuters. "While the reform package is far-reaching, it does not yet comprehensively address the "too-big-to-fail" problem," Swiss National Bank Chairman Philipp Hildebrand said in a statement. Analysts say the Swiss regulators may require more Tier 1 capital than the Basel group asks for.

Greek Prime Minister George Papandreou welcomed the Basel III banking rules accord, saying it would help build trust and enable banks to take on more risk, according to Reuters. "In general this is a very important, good step," he told a news conference in Oslo during a meeting about global unemployment.

The news of the Basel recommendations drove large U.S. banks' stocks up, according to ABC News. Bank of America's stock rose 1.8 percent to $13.80 in premarket trading and Citigroup gained 1 percent to $3.95. The Select Sector Financial SPDR was up 1.4 percent to $14.74.